A 1099 and W-2 from whom?  From her own S corporation, or from her broker?  I don't see a problem with her broker giving her corporation a 1099-NEC.  There may be state law that prevents that from flowing through to her on a 1099-NEC.  But the fuss about S corporations is that they are abused to avoid SE taxes.  That wouldn't happen in the situation you describe.  But I'm trying to understand what she is trying to accomplish by doing it that way.  

The fact that you can't find any court cases, just means that IRS hasn't issued many notices of deficiency where it saw a problem with this.